Monday, October 22, 2012

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No firm enters the market with the intention of loosing money. Unfortunate for them the risks are always high and almost any company will encounter some sort of obstacles sooner or later. When a firm decides to expand internationally and begin exporting or importing from foreign markets, the business experiences some of its most difficult dilemmas, which include inconsistent foreign laws and regulations, cultural and linguistic differences, as well as social and ethical responsibilities of domestic firms to keep an image of integrity overseas, in the face of a “Politically Correct” friendly society. These issues sound easy to tackle and regulate, but unfortunate to those involved there is not always a clear dividing line that separates legal from illegal and ethical from unethical in a foreign environment. One of the most frequently discussed issues when it comes to the global market involves labor laws, which include child labor, un-safe factory conditions, under paid employees, as well as the legal and ethical responsibility of a firm’s international sub-contractors. Just because a law or regulation is legal in a third world nation, does it justify a developed nation (like the United States) to profit off third world citizens, and get away with practices it could not use domestically, or are we helping countries slum economy? The most famous and frequently mentioned company that is accused of defying these legal and ethical responsibilities is the sports giant Nike.

Nike was started by Phil Knight back in 17 after separating from “Blue Ribbon Sports” which was the forerunner of the mega-empire Nike. Phil Knight realized that the U.S. athletic market was dominated by expensive German made shoes. Knight saw the opportunity in Japan, to subcontract the Onitsuka Tiger Company; a Japanese based athletic shoe company. Knight convinced the Onitsuka Tiger Company that there was a big enough market demand for their athletic shoes, which could directly compete with their German competition. (Nike.Com)

Phil Knight began selling the new shoes out of the trunk of his car at local and regional track meets, and some 5 years later Nike was the world’s leader in shoemaking and controlled over 0% of the U.S. athletic shoe market. (Hoover Online) Then in 17 a crucial blow came to the Nike Corporation, when an internal audit was leaked that revealed unsafe working conditions in a Vietnamese factory, which was run by a sub-contractor of Nike. The leaked audit stated the factory “lacks adequate safety equipment and training, encourages excess overtime, and exposes workers to hazardous chemicals, noise, heat and dust.” (CNN.com) That same year the Council on American-Islamic Relations (CAIR) objected to a Nike shoe that had a similar word to “Allah” on the heel. A year later, Julia Esmeralda Pleites a Nike sweat shop worker from El Salvador was flown to Washington D.C., by the National Labor Committee, to advocate workers rights. Mrs. Pleites gave devastating statements describing the conditions of the factory she worked in; she described some of the following

“[factory managers]they search you physically. They make the men drop their pants.”

“None of us ever heard of the Nike Code of Conduct, which I am told exists. I am told that companies like Nike say we are treated well and that our rights are respected. That is not true. When I saw the price of a Nike shirt, $75, which would be more than 650 colones(15 ½ days of work) in El Salvador, I couldnt believe it.”

Needless to say these events came as a lethal blow to Nike, and that same year Nike Sales fell 50%. Nike scrambled to put together a vigorous Public Relations campaign defending itself against allegations that it used sweatshops to produce their product. Part of the P&R campaign Nike announced it had given Indonesian workers a 5% minimum-wage increase, and had stopped using child labor. Nike spokesman also noted the companys critics had overlooked reports by CARE (a global relief agency). According to those studies, Workers were not only making enough to meet their basic needs, but had enough to send to their family members in rural areas and still have some discretionary income. Nike donated $4 million to charities and special causes (Big Brothers & Big Sisters, playground construction projects, youth sports leagues and health and education programs) that year. “Nike [also] apologized to Muslims for any unintentional offense, agreed to recall all products carrying the design, introduced training for Nike designers in Islamic imagery and agreed to investigate how the design came about.” The company also agreed to build three playgrounds for the Islamic community to ease tensions.

Some say Nike was targeted because they were the giant in their target market; others say that Nike is the definition of an “evil empire.” Ultimately there is no question through globalization; Nike exploits cheap labor and foreign markets, enabling them to increase revenue in the U.S. Hundreds of other companies are in the same practice, what is important in our modern “Politically Correct” society is not always the truth, but more so how Nike[and others] deal with these issues and treat foreign workers in the eye of the public. Nike sales plummeted (more then 50%) when the company was in the public’s eye; stock fell almost 5% in one month (Yahoo!). As of October 00, Nikes stock had risen 0% from the previous month, and Nike’s stock today has not lost a single penny in value since 16, when the company began to get attacked for labor practices.

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